2. Board Secretary Conference (12-13th Nov’ 2013, Dubai)
1. Introduction
2. Elements of an effective ethics and compliance culture
3. Five phase approach for value addition
4. Evaluating the organisational culture
5. The board’s oversight responsibilities
Contents
Vijay Ojha
3. Board Secretary Conference (12-13th Nov’ 2013, Dubai)
Some Recent Headlines:
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1. JP Morgan Chase : agreed to pay $ 13 billion for settlement with SEC
2. HSBC: $ 1.9 billion penalty under anti money laundering law
3. Standard Chartered Bank: paid $327 million for violation of Iran Sanction
4. GlaxoSmithKline (GSK): Penalty of $3 billion under drug safety data violation
5. Total S.A. : penalty of $398 million for bribes to get oil and gas field
6. Eli Lilly and company: charged for improper payment and fined $29 million
7. Tyco International: paid $26 million to settle the SEC's charges under FCPA
8. Oracle: charged for violation of FCPA
9. Pfizer: charged for bribing by its subsidiaries penalised $45 million
10. Infosys: fined $34 Million for non compliance of I-9 forms by DOJ, USA
5. Board Secretary Conference (12-13th Nov’ 2013, Dubai)
Why Ethics and Compliance Culture:
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• Safeguard the financials loss, reputation loss and stakeholders interests
• Protection from the legal hassles and hefty penalties
• Healthy returns through employee and customer loyalty
• Public respect for their brand and values and increase in shareholders
returns
• Provide foundation for an effective internal control environment
• Employees who observe the law may avoid stiff personal penalties,
both monetary and potential imprisonment
6. Board Secretary Conference (12-13th Nov’ 2013, Dubai)
What is Ethics and Compliance Culture?
For normal understanding:
ETHICS are a system of moral principles and a branch of
philosophy which defines what is good for individuals
and society
COMPLIANCE is to fulfill the statutory, regulatory, legal and
local requirements as per the applicable rules,
regulations and common practices
CULTURE is a way how people live, act and behave in the
society or group or organisation. It depends upon
geographical, social and economical conditions as well.
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7. Board Secretary Conference (12-13th Nov’ 2013, Dubai)
Elements of Effective Ethics & Compliance Culture:
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1. Leadership
Leaders’ set the tone for the organisation. The organisations
are known through its leadership. Imbibing ethics and
compliance in the leadership Motivates the followers.
2. Written Standards, Policies and Procedures
Written standards, policies and procedure will provide the
requisite guidance for the associated persons to act in
accordance with the given circumstances.
8. Board Secretary Conference (12-13th Nov’ 2013, Dubai)
Elements of Effective Ethics & Compliance Culture...
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3. Risk Assessments
Identification of the ethics and compliance risks
from the activities of the organisation and take
appropriate and timely remedial action to
mitigate the related risk
4. Effective Communication
It is the root of success for any ethics and
compliance program. Clear understanding of
policies, procedures and means to communicate
at every level.
9. Board Secretary Conference (12-13th Nov’ 2013, Dubai)
Elements of Effective Ethics & Compliance Culture….
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5. Accountability
Understanding of accountability at each level i.e. from
the policy maker to the executor that what to do what
not to do and how to do
6. Training and Education
Must for employees, exiting or new, associated parties,
customers, vendors about the ethics and compliance
culture of the organisation and continuous review
10. Board Secretary Conference (12-13th Nov’ 2013, Dubai)
Elements of Effective Ethics & Compliance Culture…..
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7. Monitoring and Assessment
Designated person for the monitoring and assessment
of the ethics and compliance program like CECO. Time
to time audit and assessment of effectiveness of the
various compliance activities
8. Timely Remedial Action
Timely remedial action on any breach of compliance or
violation of any ethical code of conduct will ensure the
compliance culture.
11. Board Secretary Conference (12-13th Nov’ 2013, Dubai)
Five Phase Approach of Value Addition:
Ethics & Culture
assessment
Gap analysis and
program design
Communication, Training
& Education
Implementation &
Monitoring
Review &
Improvement
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12. Board Secretary Conference (12-13th Nov’ 2013, Dubai)
Ethics and Culture Assessment:
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• Employees Survey, Interview
• Review of existing Practices, CSR activities
• Policies and procedure if any
• Identify gap with the prescribed standards and actual practice
• Understanding of ethics and compliance culture at various level
13. Board Secretary Conference (12-13th Nov’ 2013, Dubai)
Gap Analysis & Program Design:
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• Analysis of the existing status with benchmark standard
• Major areas of concern
• SWOT analysis in relation to ethics and compliance
• Designing of ethics and compliance culture program and formulation of
ethics and compliance policies, procedures and guidelines
• Define accountability for leadership, middle management and execution level
for their activities
14. Board Secretary Conference (12-13th Nov’ 2013, Dubai)
Communication, Training & Education:
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• Clear communication to each level about the objective and intention of
the organisation for Ethics and Compliance culture
• Display on notice board and at relevant places for easy access to all
employees.
• All policies, procedures and guidelines to be readily available and
accessible to all employees
• Training and education to all employees including existing and new and
regular review for their understanding
15. Board Secretary Conference (12-13th Nov’ 2013, Dubai)
Implementation & Monitoring:
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• Appointment of compliance officer / constitution of committee as per size
of business to be the point of contact
• Take reasonable steps to ensure that individuals with substantial authority
have not engaged in illegal activities
• Establishment of communication channel – HOTLINE for quick reporting
• Creation of fearless working environment for whistleblower
• Regular monitoring through employees feedback, suggestion schemes,
16. Board Secretary Conference (12-13th Nov’ 2013, Dubai)
Review & Improvement:
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• Periodic ethics and compliance audit
• Highlight the major concern to the Board of Directors
• Timely remedial action on any breach of policy
• Improvement in the area of concern and modification in policies if
require to address any concern which is not covered.
• Periodic review resolves the issues raised through changes in the
regulatory and business environment and identify any necessary
improvements
17. Board Secretary Conference (12-13th Nov’ 2013, Dubai)
Evaluating the Ethics and Compliance Culture:
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1. Status of the organisations CSR activities
2. Cost of non compliance, penalty etc. status of the regulatory, statutory and legal
compliances.
3. Awareness of organisational ethics and compliance policies, values and guidelines
4. Knowledge of workplace rules and regulations and ethical issue may arise at work
place
5. Willingness to report management about problems, legal violations without fear
6. Perception of fair treatment within the organisation and commitment to the
organisation
7. Perceive that ethical behavior is rewarded and unethical behavior punished at all
levels. Reward and recognition for whistleblower
19. Board Secretary Conference (12-13th Nov’ 2013, Dubai)
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Obstacles to Building a Strong Ethical Culture
Source-LRN Survey report 2013
20. Board Secretary Conference (12-13th Nov’ 2013, Dubai)
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• New regulations require the Board to be more actively engaged in the ethics and
compliance reporting process
• Overall responsibility for the conduct of the business
• Setting the tone to conduct business in an ethical manner
• WALK THE TALK – to play a visible role in overseeing ethics and compliance
• Appoint Compliance Officer and review the ethics and compliance report on
regular basis
• Create fearless environment for whistleblowers or other employee who voices
concerns about company or individual actions
• Ensure timely actions taken by the concern on any issue related with ethics and
compliance
Board’s Oversight Responsibilities:
21. Board Secretary Conference (12-13th Nov’ 2013, Dubai)
Its never too late to start!
Vijay Ojha
contact: csvijayojha@hotmail.com
